U.S. Hotel Fees Forecast to Reach $2.7 Billion in 2017 as Stricter Cancellation Policies Take Hold

Deanna Ting, Skift

- Oct 04, 2017 2:30 am

Skift Take

We all understand why hotels are collecting more fees but the types of fees and surcharges they’re collecting seem to be changing in interesting ways. More stringent cancellation fees are a trend while totals for Internet-access fees declined.

— Deanna Ting

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For the ninth year in a row since 2009, U.S. hotels are expected to collect from guests a record amount of total fees and surcharges.

This year, according to a report compiled by Bjorn Hanson, clinical professor at the NYU Jonathan M. Tisch Center for Hospitality and Tourism, hotels are expected to collect a $2.7 billion in fees and surcharges. Hanson’s report is based on interviews with hotel and corporate travel executives, analysis of financial data, press releases, and information from hotel and brand websites.

The estimated 2017 tally increased 3.84 percent to $2.7 billion compared with the $2.6 billion collected in 2016 despite the fact that occupied room nights in 2017 were fewer than expected. In 2017, hotels in the U.S. saw an uptick of 2 percent in occupied room nights compared with 2016.

One likely reason why hotels still managed to increase the total amount of fees they collected this year is the increased emphasis on cancellation fees by the major hotel chains.

“This is something the brands have started looking at years ago,” said Hanson. “It’s only been in the last year where we saw brands — prior to their announcements — try this more at individual hotels and certain reservation centers. Some hotels now have it on their websites and in their email confirmations. Brands are becoming more vigorous about their cancellation policies and enforcement.”

For hotels, enforcement of cancellation policies simply makes good business sense: It helps them manage their inventory more precisely and, of course, it also contributes to their bottom lines. That’s assuming, of course, that competitors with more lenient cancellation policies don’t take advantage.

Another trend Hanson cited was that this was the first year he’s seen a drop in the total fees collected for high-speed Internet access at hotels. “This was the first year we saw a decline in Internet access fees,” he said. “There’s now a base level of bandwidth available for no charge, but there are premium charges for higher bandwidth.” Hotel loyalty program members, he noted, often receive complimentary Internet access during their stays.

Some other emerging hotel fees Hanson has seen include charges for early check-in at resorts, such as mega-resorts in Las Vegas or urban hotels; charges for surface parking at suburban hotels; and charges for checking luggage at a hotel as a baggage holding fee, in addition to the traditional gratuity.

One type of fee that doesn’t seem to be catching on is a fee for the guarantee of a particular room type because it can be a logistical nightmare for hotels to follow through in a way that guests expect when they’re being charged a fee. It’s also a reason why so many hotels have yet to enable to guests to pick the exact room that they would want to stay in, just like they might pick an exact seat on an airplane prior to a flight.

“The reason it hasn’t worked is because someone can arrive and the hotel does have a room to assign to that person — but it might not be the exact room type requested,” Hanson said. “So, the hotel tells the guest they can have the requested room type in a half hour or so, but then the guest perceives that as something going wrong. But it’s just the reality of room inventory.”

Hotel fees, Hanson said, are now “a mature practice” and they aren’t going away anytime soon. With the exceptions of 2001 and 2008, when demand for hotels declined, the amount of fees and surcharges collected by U.S. hotels has gone up every year since 2000 when Hanson began compiling the annual report. Those fees, as well, are highly profitable: Many have incremental profitability of 80 to 90 percent or more of the amounts collected.

What About Hidden Hotel Fees?

Hanson believes that reports of “hidden” or “surprise” hotel fees is unfounded because, in his research, he’s found disclosures on websites, confirmation emails, tent cards in rooms, room service menus, and guest service directories to be on the rise.

Hanson told Skift previously that in his hotel fee research, “I couldn’t find a single case where the resort fee or amenity fee wasn’t fully disclosed, but that doesn’t mean people don’t miss it. The disclosure was good — it was the traveler or guest’s failure to pay reasonable attention.”

However, that hasn’t stopped some lawmakers in recent years from investigating the hotel industry’s practices related to fees. Last year, Senator Claire McCaskell, a Missouri Democrat, introduced a bill in the U.S. Senate that would require hotels and online booking sites to disclose during the booking process any fees that are typically charged at the end of a stay.

The Truth in Hotel Advertising Act of 2016 would give the U.S. Federal Trade Commission the ability to enforce penalties on companies that advertise hotel rates without including additional mandatory fees. Most recently, lawmakers in Hawaii said they are investigating resort fees.